Hindustan Unilever Limited (HUL), a titan in India’s fast-moving consumer goods (FMCG) sector, is reportedly in advanced discussions to acquire the direct-to-consumer (D2C) skincare brand Minimalist. This potential acquisition, valued at approximately $350 million (₹3,000 crore), marks a significant milestone in India’s booming D2C ecosystem and highlights the strategic pivot of large conglomerates toward younger, digitally-savvy consumer bases.
A Rising Star: Minimalist
Minimalist, founded in 2020 by siblings Mohit and Rahul Yadav, Minimalist has rapidly carved a niche in the skincare industry. Minimalist rapidly risen to prominence by offering clinically tested skincare, haircare, and body care products formulated with active ingredients. In just four years, the brand has achieved an exceptional growth trajectory:
- Revenue Surge: Minimalist’s revenue grew by 89% YoY in FY24, reaching ₹350 crore, up from ₹184 crore in FY23.
- Profit Doubling: The startup’s net profit more than doubled in FY24, rising from ₹5 crore in FY23 to ₹11 crore.
- EBITDA Margin and ROCE: Its EBITDA margin improved from 3% in FY23 to 4% in FY24, while Return on Capital Employed (ROCE) jumped from 4% to 9%.
- Efficiency Metrics: Minimalist spent ₹0.95 to generate every rupee of operating revenue in FY24, showcasing enhanced operational efficiency compared to ₹0.98 in FY23.
Strategic Fit for HUL
For HUL, the acquisition aligns with its strategy to diversify its product portfolio and strengthen its foothold in the beauty and personal care (BPC) segment, which accounts for 37% of its total revenues. Despite its extensive portfolio of brands like Dove, Lakmé, Pond’s, and Lifebuoy, HUL lacks specialized skincare serums and active ingredient-based products—a gap Minimalist effectively fills.
The deal also comes at a critical juncture for HUL, which reported a 5% decline in its personal care segment in Q2 FY25, attributed to pricing pressures and volume declines. By bringing Minimalist under its umbrella, HUL aims to reinvigorate its BPC segment and tap into the rising demand for science-backed skincare products.
Key Financial Figures Supporting the Deal:
- Revenue Multiples: Minimalist is commanding a revenue multiple of 10x, significantly higher than the 4-6x typical for similar D2C startups.
- Advertising Efficiency: Minimalist allocated 35% of its revenue (₹117 crore) to advertising in FY24, nearly double the ₹65 crore spent in FY23, yet achieved remarkable ROI on these efforts.
- Cash Position: As of March 2024, Minimalist had a cash balance of ₹30.27 crore, ensuring financial stability.
Industry Context and Strategic Implications
This acquisition would mark HUL’s first foray into the high-growth D2C skincare space, following its successful acquisition of OZiva (₹264 crore) and a 19.8% stake in Wellbeing Nutrition (₹70 crore) in 2022. With the global skincare market expected to grow at a CAGR of 5.2% from 2023 to 2030, securing a foothold in the D2C segment offers long-term growth potential.
However, the move comes at a time when HUL’s personal care revenue witnessed a 5% decline in Q2 FY25 due to negative pricing actions. The integration of Minimalist could help counteract this trend by introducing high-margin, innovative products tailored to emerging consumer preferences.
A Win-Win for Both Parties
For Minimalist, the partnership with HUL’s extensive distribution network and marketing capabilities promises exponential growth. The startup’s valuation has skyrocketed from ₹75-80 crore during its Series A funding in 2021 (led by Unilever Ventures and Peak XV Partners) to the current ₹3,000 crore, reflecting its robust financial health and market appeal.
Conclusion
The acquisition of Minimalist represents a strategic masterstroke for HUL, providing it with access to a thriving D2C brand that has redefined skincare innovation in India. By leveraging Minimalist’s strong fundamentals and aligning them with HUL’s operational expertise, this deal has the potential to reshape the competitive landscape of the BPC sector.
